Supreme Court to Weigh In on Possible RESPA Violation

The top court in the land has agreed to clarify and hopefully close an interesting loophole in the Real Estate Settlement Procedures Act (RESPA). Last week, the U.S. Supreme Court agreed to address the scope of the law meant to protect homebuyers from being overcharged for settlement services.

The question the court will resolve is whether a provision of RESPA that bans service providers from charging for services they do not render applies only when the unearned fees are split between two or more parties.

Can it be considered a kickback if the payment doesn’t go to a third-party company? Or is this just another hidden fee that we wrote about earlier this month?

The original case, brought by Louisiana residents Tammy and Larry Freeman, alleges Quicken Loans charged them a $980 loan discount fee on a mortgage loan in 2007. Though that fee is normally imposed in exchange for a lower interest rate, Quicken allegedly did not reduce the Freemans’ interest rate.

Quicken Loans acknowledged charging the fee but denied the remainder of the allegations. “Quicken Loans has never charged unearned fees and never will,” said the firm in a statement earlier this year.

How do you feel the Supreme Court should rule? Is this an instance of a lender taking advantage of a homebuyer or is this just par for the course? How would you advise a buyer to handle a situation like this?